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GDP can be thought of as CIGXM.

  • C: Consumption - private spending by consumers
  • I: Investment - includes equipment, inventory, and new homes
  • G: Government spending - does not include transfer payments
  • X: Exports - goods or services that an entity chooses to produce for another entity
  • M: Imports - goods and services from another entity (this combined with the X term is sometimes referred to as "net exports").
  • Transfer payments: social security, welfare, stocks, bonds, and any other transfer of funds in which nothing is produced

Using this method, the equation for GDP is GDP=C+I+G+(X-M).

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